Seeking an end to the discriminatory taxation regime adopted for petroleum products, the Petroleum and Natural Gas Ministry has asked the Finance Ministry to bring petroleum products, including crude oil, petrol, diesel, ATF and gas, under the new Goods and Services Tax (GST) regime in line with the recommendations of the XIII Finance Commission.
In a communication to the Finance Ministry, the Petroleum Ministry has pointed out that the XIII Finance Commission had recommended that petrol, diesel, aviation turbine fuel (ATF), crude oil and natural gas should form part of the Goods and Services Tax legislation. It has also recommended that revenue concerns of the States and the Centre could be addressed by levying, if necessary, an additional tax (excise tax) on these commodities in addition to GST, while bringing them within the ambit of GST.
It has argued that the move to keep these products outside the GST could permanently deprive this sector of the advantages of GST. “To address the concerns of the State governments of revenue loss due to inclusion of this sector in the GST regime, levy of an additional tax, if necessary (without any input tax credit) as recommended by the XIII Finance Commission on these commodities in addition to GST, while retaining them in the ambit of GST maybe considered,” the communication states.
Warning against partial implementation of GST for some petroleum products will push up costs for the sector as the States would be levying service tax under the new regime, input credit cannot be availed of by the sector for the excluded basket. On the other hand, the inclusion of petroleum products under GST will eliminate stranding of taxes paid by suppliers as well as by the industry at different stages in the petroleum value chain besides enabling States and the Centre to capture full revenue potential, it said.
As per the first discussion paper presented by the Empowered Committee of State Finance Ministers and the Constitutional Amendment Bill introduced in Parliament, the basket of petroleum products have been kept outside GST. The Central and State taxes will continue to be levied at the prevailing rates on these products.
